ABS Issuance and Lending Attitude of Banks

This paper investigates whether an increase in ABS issuance, or securitized products, by leasing companies has been influenced by Japanese banks’ tightened lending attitudes in 1990s. Our focus is in particular to examine the importance of asset securitization for leasing companies when bank lending is decreased. Leasing companies have been major originators and equipment lease receivables have been the most commonly securitized assets in Japanese ABS market. Leasing companies, however, have heavily relied on bank lending as their funding measures that the effect of credit crunch to the industry is examined. The conclusions in this paper are the following; (1) Disintermediation of bank lending tends to lead an increase in ABS issuance in the market. It is also obtained that banks’ lending attitude is granger-cause securitization issuance of leasing companies. (2) The issuance by leasing companies significantly increases in September mid-year and March end-year periods, the first and the third quarters. (3) CP issuance seems to be an alternative method of ABS issuance, however bond issuance doesn’t. No significant relation is observed between ABS and corporate bond issuance.